BLOG

Estate planning helps disperse your assets according to your wishes. The effort may seem daunting at first, but estate planning does not have to be overly complicated. With the proper planning, you may find yourself resting a little easier knowing you have an estate plan in place. While an estate plan is personalized to the wants and needs of each person, here are a few tips to help anyone get started.

1. Create an Inventory of Physical Assets

One of the first steps in creating an estate plan is knowing what you have, so you may list the items to include in the estate. For many people, working from the inside of the home is easiest. Start by assessing the items in your home that are valuable. These valuable items may include collectibles, jewelry, artwork, antiques, electronics, and power tools. This list may take some time to build, so creating it at a comfortable pace over multiple sessions might be appropriate.¹

2. Take Stock of Your Non-Physical Assets

You may also need to inventory your non-physical assets. These non-physical assets might include life insurance, long-term care, and health insurance policies. They also may include money sources, such as 401(k)s, IRAs, investments, and bank accounts. You want to include in your inventory the account numbers and documentation for these accounts.¹

3. Document Your Obligations

Your debts, such as loans and credit cards, should be itemized with account numbers, contact information, and where you keep your documentation on these debts. This strategy helps ensure that the estate pays off any required debt obligations, which the estate must pay from estate funds.¹

4. Consider Transfer-on-Death Assignments

With some assets, it is possible to bypass probate for those items, even if you pass away intestate (without a will), by creating a transfer-on-death designation for those assets. When these transfer documents are on file with certain accounts, the beneficiary might be able to receive the funds without having to wait for the completion of probate. Some of these types of accounts, which may have the option of a transfer-on-death designation, include savings accounts, brokerage accounts, and certificates of deposit (CDs).²

5. Make a Will

Your will serves as the instructions about how you wish to distribute your assets. This document helps ensure that your heirs know what you wish to happen with your estate. Having a will may reduce infighting among heirs. Your will designates who your beneficiaries are and what they get. It may cover custody of minor children and any charitable contributions you wish to make. You need to sign your will in front of witnesses. Be certain that its location is known to the executor of your estate to prevent delays in the will’s execution.² Estate planning does not have to be a headache. Following these simple tips and taking the time to document your assets properly may make estate planning more manageable.     Important Disclosures: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. This article was prepared by WriterAccess. LPL Tracking # 1-05367403

Footnotes

¹ Estate Planning: 16 Things to Do Before You Die https://www.investopedia.com/article /10/estate-planning-checklist.asp ² Estate Planning Basics https://www.forbes.com/advisor/retirement/estate-planning/

What is it?

Life insurance is not only about protecting your survivors in the event of your death. Depending upon the type of policy you purchase, it can also enable you to meet specific life goals: retiring comfortably, paying for your child's education, accumulating wealth, and paying for estate costs. If you own a business, life insurance can even fund the purchase of your business interest when you die or decide to sell your business. In addition, life insurance can provide you with certain tax benefits. The following life insurance-related strategies may help you to achieve your various investment objectives.

Buy term and invest the difference

Individuals who buy cash value life insurance typically do so because it offers them a chance to accrue savings and protect loved ones simultaneously. On the downside, however, cash value life insurance involves higher premiums than term life insurance and may afford you little (or no) opportunity to manage and control your investment. Depending upon your financial situation and goals, it may be best to buy term life insurance and invest the difference between the term insurance premium and the cash value premium in an investment of your own choosing. Although a certain amount of risk will be involved, it may be possible for you to obtain higher returns on your own, as insurance companies tend to invest quite conservatively. In terms of risk, be aware that many investors who intend to invest the difference end up spending the difference. Also, term insurance does not last indefinitely. When your term is up, your premium to renew may skyrocket, or perhaps you may not even qualify to renew or replace the policy.

Use cash value life insurance to save for education

Buying a cash value life insurance policy to save for a child's education may be appropriate when you desire the protection that life insurance offers and you also need funds for future college or private school tuition. When you die, your beneficiary will receive a death benefit from the policy; these funds can be used for ordinary expenses or to pay for a child's education, if necessary. In addition, there are two other ways you can fund your child's education with cash value life insurance. First, once your policy has accumulated a substantial cash value (usually after 10 to 15 years), you can withdraw all or part of the cash value to pay for your child's education (the amount you can withdraw depends upon your policy and the insurance company). Or, you can borrow funds from the insurance company, using your policy cash value as collateral. One of the advantages of using cash value life insurance to pay for your child's education is that owning a cash value life insurance policy won't affect your child's eligibility for federal financial aid. (However, some colleges and universities may consider policy cash values when assessing your child's need for financial aid.) One drawback is that if you don't pay back into the policy what you've withdrawn or borrowed, the policy's death benefit will be reduced.

Use cash value life insurance for retirement savings

Because cash value life insurance has both investment and protection components, you can use cash value life insurance to save for your retirement in addition to protecting your survivors. Here's how this strategy works. When you purchase a cash value life insurance policy, cash value begins to grow tax deferred. When you retire, you can withdraw or borrow against some or all of your policy's accumulated cash value (potentially free from income tax) if you need the money to supplement other retirement income or savings. When you die, any remaining death benefit may be payable to your beneficiaries.

Consider life insurance when planning your estate

A comprehensive estate plan will probably make use of life insurance. The proceeds from a life insurance policy will ensure that your survivors have necessary cash immediately following your death to pay for day-to-day living expenses and estate costs (such as bills and taxes). In addition, because life insurance can be used as a vehicle for making charitable donations, you can accomplish your philanthropic wishes and reduce your estate and gift tax liability at the same time. Life insurance and estate planning can involve complex issues, so it's wise to get expert advice if you're considering this possibility.

Fund your buy-sell agreement with life insurance

If you own a business, you can use life insurance to fund a buy-sell agreement, which is a formal agreement that spells out how a business interest will be transferred if an owner dies or decides to sell his or her interest. There also are other business applications for life insurance; some examples include insuring a key employee, providing insurance as an employee benefit, and funding split dollar arrangements or qualified retirement plans.       This article was prepared by Broadridge. LPL Tracking #1-606301

529 plans can be powerful college savings tools, but you need to understand how your plan works before you can take full advantage of it. Among other things, this means becoming familiar with the finer points of contributions and withdrawals.

How much can you contribute?

To qualify as a 529 plan under federal rules, a state program must not accept contributions in excess of the anticipated cost of a beneficiary's qualified education expenses. At one time, this meant five years of tuition, fees, and room and board at the costliest college under the plan, pursuant to the federal government's "safe harbor" guideline. Now, however, states are interpreting this guideline more broadly, revising their limits to reflect the cost of attending the most expensive schools in the country and including the cost of graduate school. As a result, most states have contribution limits of $350,000 and up (and most states will raise their limits each year to keep up with rising college costs). A state's limit will apply to either kind of 529 plan: savings plan or prepaid tuition plan. For a prepaid tuition plan, the state's limit is a limit on the total contributions. For example, if the state's limit is $300,000, you can't contribute more than $300,000. On the other hand, a savings plan limits the value of the account for a beneficiary. When the value of the account (including contributions and investment earnings) reaches the state's limit, no more contributions will be accepted. For example, if the state's limit is $400,000 and you contribute $325,000 and the account has $75,000 of earnings, you won't be able to contribute any more — the total value of the account has reached the $400,000 limit. These limits are per beneficiary, so if two people each open an account for the same beneficiary with the same plan, the combined contributions can't exceed the plan limit. If you have accounts in more than one state, ask each plan's administrator if contributions to other plans count against the state's maximum. Generally, contribution limits don't cross state lines. In other words, contributions made to one state's 529 plan don't count toward the lifetime contribution limit in another state. But check the rules of each state's plan.

How little can you start off with?

Some plans have minimum contribution requirements. This could mean one or more of the following: (1) you have to make a minimum opening deposit when you open your account, (2) each of your contributions has to be at least a certain amount, or (3) you have to contribute at least a certain amount every year. But some plans may waive or lower their minimums (e.g., the opening deposit) if you set up your account for automatic payroll deductions or bank-account debits. Some will also waive fees if you set up such an arrangement. (A growing number of companies are letting their employees contribute to savings plans via payroll deduction.) Like contribution limits, minimums vary by plan, so be sure to ask your plan administrator.

Know your other contribution rules

Here are a few other basic rules that apply to most 529 plans:

• Only cash contributions are accepted (e.g., checks, money orders, credit card payments). You can't contribute stocks, bonds, mutual funds, and the like. If you have money tied up in such assets and would like to invest that money in a 529 plan, you must liquidate the assets first.
• Contributions may be made by virtually anyone (e.g., your parents, siblings, friends). Just because you're the account owner doesn't mean you're the only one who's allowed to contribute to the account.
• 529 savings plans typically offer several different investment portfolios that you can pick from to invest your contributions. If you want to change your investment option, you can generally do so twice per calendar year for your existing contributions, anytime for your future contributions, or anytime you change the beneficiary of the account.
• 529 account owners who are interested in making K-12 contributions or withdrawals should understand their state's rules regarding how K-12 funds will be treated for tax purposes. Some states may not follow the federal tax treatment. In addition, account owners should check with the 529 plan administrator to determine whether a K-12 withdrawal request should be made payable to the account owner, the beneficiary, or the K-12 institution.

Maximizing your contributions

Although 529 plans are tax-advantaged vehicles, there's really no way to time your contributions to minimize federal taxes. (If your state offers a generous income tax deduction for contributing to its plan, however, consider contributing as much as possible in your high-income years.) But there may be simple strategies you can use to get the most out of your contributions. For example, investing up to your plan's annual limit every year may help maximize total contributions. Also, a contribution of $17,000 a year or less in 2023 qualifies for the annual federal gift tax exclusion. And under special rules unique to 529 plans, you can gift a lump sum of up to five times the annual gift tax exclusion — $85,000 for individual gifts or $170,000 for joint gifts — and avoid federal gift tax, provided you make an election on your tax return to spread the gift evenly over five years. This is a valuable strategy if you wish to remove assets from your taxable estate.

Lump-sum vs. periodic contributions

A common question is whether to fund a 529 plan gradually over time, or with a lump sum. The lump sum would seem to be better because 529 plan earnings grow tax deferred — so the sooner you put money in, the sooner you can start to potentially generate earnings. Investing a lump sum may also save you fees over the long run. But the lump sum may have unwanted gift tax consequences, and your opportunities to change your investment portfolio are limited. Gradual investing may let you easily direct future contributions to other portfolios in the plan. And realistically, many parents may not be able to fund their account with a lump sum, but they may be able to easily make monthly investments.

Qualified withdrawals are tax free

Withdrawals from a 529 plan that are used to pay qualified education expenses are completely free from federal income tax and may also be exempt from state income tax. For 529 savings plans, qualified education expenses include the full cost of tuition, fees, books, equipment, and room and board (assuming the student is attending at least half-time) at any college or graduate school in the United States or abroad that is accredited by the Department of Education; the cost of certified apprenticeship programs (fees, books, supplies, equipment); student loan repayment (there is a $10,000 lifetime limit per 529 plan beneficiary and $10,000 per each of the beneficiary's siblings); and K-12 tuition expenses up to $10,000 per year. Note: A 529 plan must have a way to make sure that a withdrawal is really used for qualified education expenses. Many plans require that the college be paid directly for education expenses; others will prepay or reimburse the beneficiary for such expenses (receipts or other proof may be required).

Beware of nonqualified withdrawals

A nonqualified withdrawal is any withdrawal that's not used for qualified education expenses. For example, if you take money from your account for medical bills or other necessary expenses, you're making a nonqualified withdrawal. The earnings portion of any nonqualified withdrawal is subject to federal income tax and a 10% federal penalty (and may also be subject to a state penalty and income tax).

Is timing withdrawals important?

As account owner, you can decide when to withdraw funds from your 529 plan and how much to take out — and there are ways to time your withdrawals for maximum advantage. It's important to coordinate your withdrawals with the education tax credits (American Opportunity credit and Lifetime Learning credit). That's because the tuition expenses that are used to qualify for a credit can't be the same tuition expenses paid with tax-free 529 funds. A tax professional can help you sort this out to ensure that you get the best overall results. It's also a good idea to wait as long as possible to withdraw from the plan. The longer the money stays in the plan, the more time it has to grow tax deferred. Note: Before investing in a 529 plan, please consider the investment objectives, risks, charges, and expenses carefully. The official disclosure statements and applicable prospectuses, which contain this and other information about the investment options, underlying investments, and investment company, can be obtained by contacting your financial professional. You should read these materials carefully before investing. As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also the risk that the investments may lose money or not perform well enough to cover college costs as anticipated. Investment earnings accumulate on a tax-deferred basis, and withdrawals are tax-free as long as they are used for qualified education expenses. For withdrawals not used for qualified education expenses, earnings may be subject to taxation as ordinary income and possibly a 10% federal income tax penalty. The tax implications of a 529 plan should be discussed with your legal and/or tax professionals because they can vary significantly from state to state. Also be aware that most states offer their own 529 plans, which may provide advantages and benefits exclusively for their residents and taxpayers. These other state benefits may include financial aid, scholarship funds, and protection from creditors.     This article was prepared by Broadridge. LPL Tracking #1-05356646

In 2021, 44.7 million Americans are facing the burden of student loan debt. They owe more than $1.53 trillion in student loans. These alarming statistics prove the importance of saving for higher education. In the past, many parents prioritized saving for their child’s college or trade school. However, today students are taking steps to cover the cost of their own higher education and keep their student loan debt to a minimum.  

Benefits of Saving for College or Trade School

When students make an effort to save for their education after high school, they get a head start on life with minimal debt. Instead of spending years trying to pay off their student loans, they can focus on other financial goals such as buying a house or saving for retirement. Saving for college or trade school may also motivate students to choose a major that provides job opportunities and encourages them to complete their degree.  

How Students Can Save for Higher Education

There are a number high school or college-aged students can save for higher education:

• Apply for Scholarships: Scholarships provide money for college that students don’t have to repay. If they’ve excelled in academics, athletics, or extracurricular activities, it may be in their best interest to apply for scholarships. Even small scholarships can help save hundreds or thousands of dollars on the overall cost of secondary education.
• Enroll in AP Classes: A high school student can earn college credits by taking Advanced Placement or AP classes in high school. The fewer credits they need to complete their degree while in college, the more money they’ll save.
• Work: While balancing classes, homework, and studying while working can be difficult, it’s not impossible. If your student can work part-time or occasionally during the school year or summer, they can save money and build their resume.
• Open a College Savings Account: Your child can help contribute to a college savings account to help grow the money they’re saving for their education.
• Delay College: If your student is serious about graduating debt-free, they may delay college or trade school and work for a few years. Once they have enough saved up, they can begin their higher education journey.
• Attend a Community College: If your student completes prerequisites at a community college initially and then transfers to a public or private four-year university or college, they may save on tuition depending on secondary education costs in your area.

 

Consult Your Financial Professional

Together we can review your financial situation and develop the ideal college savings plan for your student. Contact us today to get started.       Important Disclosures: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.   All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.   LPL Tracking # 1-05182676  

Whether you are an employee in corporate America or a small business owner, retirement is a part of life. For many, the thought of retiring and whether or not you are ready to take those first steps might be overwhelming or intimidating. Ancient philosopher Lao Tzu once said, “The journey of a thousand miles begins with one step.” [i] Here is a 6 question checklist for small business owners to ask themselves to determine if they are ready for retirement.  

☐  Have I decided on a retirement timeline?

Most people don’t wake up one day and decide that they will retire tomorrow. It is a decision that requires years of preparation. Knowing when you want to retire is the first step toward pursuing this goal.  

☐  Do I have enough money set aside to maintain my quality of life after retirement?

This might seem like a no-brainer when it comes to retirement, but many small business owners wonder if they will have enough to comfortably retire. Experts suggest that upon retirement, you want to have at least 10 times your annual salary in savings. Here are a few more questions to consider in preparation for retirement: [ii]

• Are your debts paid off?
• Will you be able to pay your retirement expenses (both entertainment and bills) long-term without having to eventually depend on social security?
• Will the 4 percent rule be an approach that is feasible for you? (The 4 percent rule refers to being able to live off of 4 percent of your invested money in the first year of retirement, then increase or decrease the amount to account for inflation in subsequent years). [iii]

 

☐  Is my retirement portfolio diversified enough?

Selling your business is one way to fund your retirement, but you don’t want it to be the only means that you depend on. Small business owners don’t have the luxury of retirement plans offered to employees of larger companies. You have to take it upon yourself to set up a self-employed 401(k), SIMPLE or SEP IRA, or another forms of retirement savings plan. You can invest in stocks and bonds, CDs, real estate, or some form of alternative investment to help mitigate the risk of one of your investment instruments not performing as expected due to some unforeseen issue or market fluctuation. Consider consulting a financial professional to help you learn what suitable course of action to take to try and lessen the chances making unnecessary mistakes. [iv]  

☐  Do I have a post-retirement plan?

Having a post-retirement plan can help you find purpose in retirement. There are countless stories out there of people that have saved and invested money for their entire careers so they could retire. They looked forward to the freedom of waking up and doing whatever they want every day; however, a year after retiring, they realize they miss the day-to-day grind of the workforce. Why is that? Simply put, going to work had given them a purpose in their lives.   They were working to provide a comfortable life for their family and saving for retirement. That is why writing out attainable goals, making checklists, and regularly referring to them are important skills to cultivate, especially for retirees.  Figure out what your new purpose will be after you retire. Write it down in a notebook and revise these plans periodically. These ideas don’t just entail financial plans and objectives, but lifestyle goals, and hobbies that you may be interested in pursuing but never had time before.  

☐  Is my succession plan in order?

Establishing a succession plan is not something that is done quickly. It requires planning and analysis, and business owners will often take years preparing to have their business passed on or sold to the right buyer. To start you want to:

• Determine the market value of your business?
• Identify succession candidates.
• Communicate your succession intentions with employees.
• Periodically review and revise your plans as you see fit.
• Stay up-to-date on tax planning and evolving tax laws. [v]

 

☐  Have I discussed my decisions and options with a financial professional?

Creating a retirement plan is complex, and consulting a financial professional can help you design a course of action that works for you and your goals. When it comes to long-term financial goals, time is your greatest commodity, so the sooner you take action, the easier it will be to pursue your objectives.       Important Disclosures: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.   Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.   There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.   Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.   Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.   CD’s are FDIC Insured and offer a fixed rate of return if held to maturity.   Investments in real estate may be subject to a higher degree of market risk because of concentration in a specific industry, sector or geographical sector. Other risks can include, but are not limited to, declines in the value of real estate, potential illiquidity, risks related to general and economic conditions, stage of development, and defaults by borrower.   Alternative investments may not be suitable for all investors and involve special risks such as leveraging the investment, potential adverse market forces, regulatory changes and potentially illiquidity. The strategies employed in the management of alternative instruments may accelerate the velocity of potential losses.   This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.   All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.   This article was prepared by LPL Marketing Solutions   Footnotes: [i] Lao Tzu Quotes - BrainyQuote [ii] 6 Signs You Have Enough Saved for Retirement, According to CFPs (businessinsider.com) [iii] What is the 4% Rule and How Can It Help You Save for Retirement? (cnbc.com) [iv]  Retirement Accounts Are Filling up—How Diversified Are They? (usmoneyreserve.com) [v] Selling a Small Business and Succession Planning for a Small Business (sba.gov)   LPL Tracking # 1-05362322  

Having enough retirement income is a top concern for many Americans nearing or in retirement. Even though they may have saved consistently throughout the working years, they may be concerned that their retirement plans will succeed. A successful retirement plan provides the ability to maintain your lifestyle for the duration of your life. Having enough retirement income for what you need and want is essential and must be planned for, even in the best economic conditions. A way to provide income safety is by using annuities as an asset class in your retirement portfolio.

Annuities Provide Safety and Income - Annuities help retirees address a specific retirement planning risk- Longevity Risk. Longevity Risk is the risk that a retiree outlives their financial assets. Here are other things to know about annuities:

• Annuities provide income for life.
• Due to their safety and growth potential, many portfolios use annuities in the financial services industry as an asset class.
• Annuities are contractual agreements with an insurance company that provide an investor with a guaranteed income stream during retirement in exchange for a premium.
• Insurance companies provide products such annuities to help individuals manage their long lives.

Annuities offer tax-deferred growth of earnings, protection of principal, and a guaranteed lifetime income. The three types of annuities widely used in financial planning are fixed annuities, fixed-indexed annuities, and variable annuities. Like any financial product, there are pros and cons to each type, and due diligence in investigating any annuity should take precedence before purchasing one for your retirement portfolio.

Variable Annuities - Tax-deferred growth opportunities, but with the risk of principal loss.

• Potentially Greater Growth.
• Provides a guaranteed income for life.
• No Principal Protection.
• Market-type returns are based on the asset class in the portfolio.
• Invests in Mutual Funds (i.e., Sub-Accounts).
• Tax-deferral benefit for non-qualified investments, not applicable to IRAs, 401(k), TSP, etc.
• Limited Investment Choices in Comparison to the Universe of Mutual Fund Choices.
• Fees Can Range from 3% to 5%, or more.

Variable annuities can be expensive and come with many fees, which decreases the accumulation value. Variable annuities are market sensitive and may incur a loss to the investor. Many times, the investor needs to understand this complex product. Working with a financial professional to know if a variable annuity is appropriate for your situation is essential.

Fixed Annuities - Provides growth opportunities with income for life and offers principal protection.

• Principal Protection - original principal plus all credited interest is guaranteed.
• Growth - a fixed rate for a declared period.
• Tax-Deferral - a benefit for non-qualified assets, not applicable to IRA, 401(k), TSP, etc.
• No Fees on Base Product
• Provides a Lifetime Income

Before purchasing a fixed annuity, investors should work with their financial professionals and consider the issuing company's rate, terms, ratings, and service levels.

Fixed-Indexed Annuities - Provides growth opportunities with income for life and offers principal protection.

• Principal Protection - original principal plus all credited interest is guaranteed.
• Growth - credited interest tied to index performance. Some products offer uncapped strategies—an inflation hedge on the portfolio.
• Tax-Deferral - a benefit for non-qualified assets, not applicable to IRA, 401(k), TSP, etc.
• Provides guaranteed income for life.
• Inflation hedge - growth is designed to increase when prices are appreciating.

Investors should consider the fixed annuity index, participation rates, and service levels of the issuing company before purchasing a fixed-indexed annuity. Both Fixed and Fixed-Indexed Annuities provide an alternative for retirees seeking income other than from traditional staples such as CDs, money market accounts, or bonds. For those seeking income and safety, annuities may be an asset class they may want to consider.     Important Disclosures: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. Fixed and Variable annuities are suitable for long-term investing, such as retirement investing.  Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply.  Variable annuities are subject to market risk and may lose value. Fixed Indexed Annuities (FIA) are not suitable for all investors. FIAs permit investors to participate in only a stated percentage of an increase in an index (participation rate) and may impose a maximum annual account value percentage increase. FIAs typically do not allow for participation in dividends accumulated on the securities represented by the index. Annuities are long-term, tax-deferred investment vehicles designed for retirement purposes. Withdrawals prior to 59 ½ may result in an IRS penalty, and surrender charges may apply. Guarantees are based on the claims-paying ability of the issuing insurance company. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. This article was prepared by Fresh Finance. LPL Tracking #1-05367581     Sources: https://www.investopedia.com/investing/overview-of-annuities/ https://www.investor.gov/introduction-investing/investing-basics/investment-products/insurance-products/annuities

For kids, teens, and college students, summer break often represents freedom from schedules, responsibilities, and all those other drains on your time. Retirement actually can provide a similar level of freedom, but only if you've adequately prepared, planned, and saved. Below, we discuss three ways that planning ahead for your retirement can be like scheduling your summer.

Deciding What to Do

After spending decades at a 9-to-5, you may struggle to find ways to fill your time after retirement. Just like summer break, a couple of weeks of well-deserved decompression may turn into boredom. It's important to have a plan to transition into retirement. Whether this means having a list of vacation destinations, a hobby to turn to, or an organization to volunteer with, giving yourself some options can help you remain active and engaged instead of simply vegetating.

Deciding Where to Go

Many new retirees spend a lot of time traveling now that they no longer need to worry about coming back to a pile of work or rationing a limited number of vacation days. As you spend time traveling during your working years, take note of the destinations you'd like to return to. Planning for retirement in general can look a lot like planning a vacation: you'll need a budget, a destination, a timeline, and a Plan B. More than just longer vacations, retirement may also mean traveling to a new home – whether downsizing, moving closer to family, or even heading to a senior living community. When considering next steps, especially if debating an interstate move, take into account factors like:

• The way your state treats and taxes retirement income
• Whether the setup of your home allows you to "age in place"
• Access to amenities
• Access to necessities (like grocery stores and hospitals)
• Transportation options
• Cost of living

By keeping these factors in mind, you'll be able to find the best fit for your lifestyle now and in the future.

Deciding How to Pay For It

How do you afford your current lifestyle? What expenses do you expect to lose in retirement – and which ones might you gain? Just like planning a vacation, planning how you'll fund your retirement can be an intricate process with many moving parts. Having a financial professional at your side can help streamline matters. Your financial professional will probably help you work backward to create your retirement financial plan. This planning can begin by evaluating how much your retirement lifestyle will cost, then figuring out how much income you'll need to afford it. By looking at sources such as 401(k), IRA savings, a pension, Social Security, and taxable savings, your financial professional will scour all your potential areas of income and help you figure out the most tax-efficient way to fund your retirement. Retirement planning can take time and effort – but just as you wouldn't embark on the vacation of a lifetime without doing a bit of preliminary research, you also don't want to leap into retirement without a plan.   Important Disclosures: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. This article was prepared by WriterAccess. LPL Tracking # 1-05367403

Once you are in your 60s, you are likely to focus less on growing your retirement funds than answering, "When do I retire?" And once you crack open your nest egg, how should you allocate its contents? The answer often lies in a substantial shift in your investment strategy. Here are some ideas for investing in your 60s and beyond.  

Preliminary Questions

Before you settle on a plan, you need to be able to answer a few questions. These include:

• How long do you need your savings to last, and how long are you likely to live?
• How many years might you be in retirement?
• What are your expected annual expenses in retirement?
• What is your non-invested income, such as pensions, Social Security, and annuity payments?

By having an idea of how much you need in retirement and how much income you may expect to receive outside of your investments, you then calculate how much you need to withdraw from your retirement funds.  

Allocating Your Retirement Assets

Everyone's safety threshold is different—but most people appreciate having a balanced portfolio of CDs and high-yield savings accounts with stock holdings. However, a too-conservative portfolio may not earn enough to outpace inflation, while a too-aggressive portfolio might leave you vulnerable to sudden market drops. There are a few different ways to approach this. One of the most popular ones is the "glide path" strategy.¹ Subtract your age from 100, and that is the proportion of assets you should have in stocks. So, for example, a 40-year-old would want at least 60% of their portfolio in stocks; a 70-year-old would want no more than 30% of their portfolio in stocks. The remainder of the portfolio's allocations might be to bonds, CDs, money-market accounts, or other assets.  

Planning Withdrawals from Your Accounts

Once you become a certain age, you are subject to the required minimum distributions (RMDs).² These are annual minimum distributions you must take from a traditional individual retirement account (IRA) and 401(k) plans. The Secure Act 2.0 increases the age that RMDs begin to age 73 for individuals who turn 72 on or after January 1, 2023. Also, a person who is 72 in 2023 is not required to take an RMD for 2023. Because RMDs increase your taxable income, many approaching 73 might benefit from working with a financial professional to manage their tax liability or reallocate withdrawals into other accounts. But before RMDs become an issue, you may still need to make regular cash withdrawals from your retirement accounts. Some accomplish this by withdrawing a flat 3% of their initial balance each year, adjusting for inflation. Depending on the investments in the portfolio, these modest withdrawals may maintain or permit your portfolio to grow from year to year. Whatever system you choose, it is important to be consistent. However, if a particular method is not working for you, switching to something that does is fine. A financial professional may help you evaluate where you are, discuss your goals and expectations, and design a plan to help manage resources.       Important Disclosures: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.   This article was prepared by WriterAccess. LPL Tracking #1-05361931   Footnotes ¹ Glide Path https://corporatefinanceinstitute.com/resources/wealth-management/glide-path ² Retirement Plan and IRA Required Minimum Distributions https://www.investopedia.com/secure-2-0-definition-5225115